Warranty claims processing is a complex and important process in many industries like Manufacturing, Automotive and many others. Very often managing warranty claims is a costly exercise for many Businesses.
Here is how warranty claims works:
- Companies work with network of dealers for introducing their products on the market.
- They partner with a whole lot of suppliers and contracts may vary by supplier.
- Different dealers might have different contract agreements with manufacturers.
- Contracts with suppliers or dealers can change over time, even often; new dealers or suppliers will join the business ecosystem.
- Products normally vary by type and number.
- Warranty claims processes flow from Customer-Dealer-Manufacturer-Supplier.
- Inventory cost is typically high when warranty claims are managed incorrectly.
- Multiple departments are usually involved in the whole process including IT, Inventory, Purchase, Recovery, etc. It is not uncommon for all these departments to work on different IT systems.
Typical problems in warranty claims processing
Some of the major issues driving costs up, individually or in different combinations, in warranty claims processing are as follows:
- Warranty claims processing, validation and review are all manual and “prone” to error activities. In some cases, the whole process can take up to 6-8 weeks.
- Warranty policies and contracts are typically not strictly enforced. This in turn can lead to fraudulent claims, incorrect billing and excessive payments.
- When a supplier’s contract changes, these changes might not flow back into the system immediately, which leads to incorrect billing.
- Multiple departments (IT, Inventory, Purchase, Recovery) involved may not have the same “visibility” into the system, or may be using different systems. This can cause delays in payments for approved claims.
- Mistakes in separating company’s warranty responsibilities from those of their suppliers or distributors result in covering costs pertaining to other entities involved in the process.
The overall cost implications of not improving efficiency in this process may be huge:
- Time spent and resources engaged in manual processing increase go-to-market costs.
- Same resources cannot be “channeled” to perform other important activities, which adds to ‘opportunity’ losses and higher operational cost.
- Unrealized claims value can be in the order of 20%, which could add up to 10’s of 1000’s of claims a year.
- Inefficient claims management means that Inventory has to remain stocked. Consequences, as financial balances show, may be serious.
- Inefficient claims management may influence relationships with dealers and suppliers and may even affect customer satisfaction adversely.
- Communication gaps lead to poor data sharing about defects.
It is obvious that these process activities cannot be automated simply through a hard-coded application exposed as a Web Service. Transferring these activities into the ‘human-centric’ domain does not obviously solve all problems.
A Business Rules Solution
- Business rules management offers natural ways to capture and enforce contracts. First and foremost rules connected to ‘contracts management’ have to be externalized from code.
- ‘Supplier billing rules’, ‘Parts disposition rules’ to name a few, are typically captured as XLS. Decision tables should be used to import these rules directly from XLSs. No manual conversion, no errors.
- Rules determining which Business unit should handle a particular claim are best captured visually in the form of flow charts. Per example operational tasks for determining who is responsible for a particular claim, for determining ‘billing and pricing rules’, etc.
Standardizing and centralizing business rules enforcement leveraging business rules management (BRM) approach can bring significant added value for any Business:
- Business is immediately enabled to ‘view’ business rules into IT systems.
- Significant initial reduction and further quick elimination of communication gaps between different departments, as well as between deals and suppliers.
- Achieve significant to full automation of warranty claims processing, enabling Businesses to drastically reduce inventory build-ups.
BRM clearly stands out as an effective solution for a variety of business scenarios, where a large scale of human and automated activities has to be performed in a concise, consistent and timely manner. It aims to fully enable automation of critical guidelines and policy driven decisions in a transparent and agile fashion.